Short selling involves selling a borrowed security with the expectation that its price will decline, allowing it to be bought back at a lower price and returned to the lender for a profit. This strategy carries substantial risk and is typically employed by experienced investors with a high tolerance for risk.
While short selling can potentially generate significant profits, it is crucial to understand the risks involved and proceed with caution. Short sellers may face unlimited losses if the price of the security rises, as they are obligated to buy it back at a higher price to return it to the lender.